Loan Modifications - Why They Take So Long
Loss Mitigation Departments from Hell
Imagine if you will the Loss Mitigation Department at your lender. For years, banks and lending institutions have had small Loss Mitigation Departments. No one knew they were there and they certainly were not advertised. These departments were deep in the bowels of their corporate buildings, places where the air was stale, a corporate Siberia where poor performing managers were banished, and sometimes executed (so we have heard and want to believe).
Once upon a time, these Loss Mitigation Departments were created to help the occasional homeowner who got behind in his loan payments and to perform Loan Modifications. Their managers would fight with the foreclosure departments in order to keep the homeowner from losing their home if at all possible. They were also given the friendly moniker "Work Out Departments" because they were supposed to help you work out a payment plan. Only the most negligent and uncooperative of borrowers would be foreclosed upon. The rest were given payment plans, a type of early Loan Modification.
Fast Forward to the Present
The large bank has purchased billions of dollars worth of "toxic" loans for pennies on the dollar from a lender we shall call Country Fried Home Loans (now out of business). At the same time they purchased similar bad (non-performing) loans from other sub-prime lenders who are also now out of business, done in by lenient, and some say criminal lending practices.
The large bank has a Loss Mitigation department whose purpose is to handle Loan Modifications, but these same banks have also been hit hard by the economy and have been forced to trim thousands and thousands of jobs across the country. The Loss Mitigation Department is a Loss Leader, not a Profit Center. The budgets for these departments have been cut drastically. This means less workers working on Loan Mods.
At the same time, these banks have been flooded with requests from homeowners, attorneys, Loan Modification companies, Consumer Advocates, Boy Scouts, Teamsters, Nudists, Ninjas, and just about any other group you can imagine for, you got it, Loan Modifications.
You get the picture. A few worried, overworked people in drab cubicles surrounded by reams and reams of paper and thousands of folders piled to the ceiling.
Add to that the mandate from the corporate execs putting the kabosh on these hundreds of thousands of modification requests and now you have a situation in this country where loan modifications have practically ceased to exist. The main problem is that Lenders have neglected to tell anyone that for all practical purposes, Loan Mods are a thing of the past. Whoops, they say, we plum forgot! Sorry.
So should you pay for a so-called "expert" to help you? There was a time not so long ago when I would have said yes, as long as they were reputable. The truth is that these days, getting a Loan Modification, even with the help of a well-meaning consultant, is next to impossible. Save your money and try for a refinance instead. If you don't have enough equity, request a six month forebearance where you won't have to make payments. If you can't get that then your only choice might be a Short Sale where you sell your home, with the bank's approval, for less than what you owe on it.
I wish I had better news, folks, but the sad fact is that we as a nation gave the bankers all of our money without demanding anything in return. My advice: vote someone into office that will actually make a difference, if such a thing is possible. Cynical? You bet.
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